Sweden’s Riksbank Delays Rate Hikes to Push Up Inflation

As was forecast by all analysts in a poll by The Wall Street Journal, the Riksbank left its benchmark interest rate at 0.75% where it has been since last December.

The bank said its main repurchase, or repo, rate is expected to remain at this level for around a year. In February the Riksbank said the first rate hike would come “at the beginning of 2015.”

“It is considered appropriate to wait until inflation picks up before beginning to raise the repo rate,” the central bank said.

The Riksbank also said it had adjusted its forecasts to reflect a greater probability of a rate cut in the near term than seen in February.

The consumer price inflation rate in Sweden has been stuck at around zero for some time, which is well below the Riksbank’s 2% target. The measure of underlying inflation most closely watched by the Riksbank, known as CPIF, which is CPI adjusted to remove the effect of changes to mortgage rates, has stayed above zero however. It was 0.4% in February and the Riksbank forecast a level of 0.7% for this year as a whole, down from 0.9% previously seen.

The bank said economic growth should accelerate to 3.2% next year from 2.7% this year. Two of the six members on the policy board, Karolina Ekholm and Martin Floden, wanted to cut the repo rate to 0.5% but were outvoted.

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